What You See is What You Get

by Sugar, Alan

  Phil Morse was in his mid-sixties and looked like a cross between Walter Matthau and the Jewish comedian Jackie Mason. His opening gambit was that he was a legend in America – he was Mr Audio. Apparently, this was true at one time, but what he’d forgotten to mention was that he was talking about five years ago. Since then, his company had failed to move with the times and its finances were starting to wane. But what shocked me was that he started to talk about his tower systems and how he was going to display them at the forthcoming consumer electronics show in Chicago.

  ‘Hold on a minute,’ I said, ‘they’re not your tower systems, they’re my tower systems. I paid a hundred per cent for the tooling.’

  ‘Nah, you may have paid for the tooling, but we’ve put in all the effort and all the engineering. We lost a lot of money designing and developing them in the early days. Let’s look at it this way – they’re not yours, they’re ours.’

  ‘No,’ I said, ‘they’re mine. And, with respect, you are not going to show these things in Chicago, as you would be exhibiting a product that belongs to me.’

  ‘Don’t worry, don’t worry, I’ll put them on display as samples. We won’t take any orders. If we get any orders, we’ll talk about it.’ A compromise was reached on that basis.

  Phil Morse was from a Polish-Jewish background and would come out with typical Jewish sayings. Surprisingly, he mentioned that Otake had been one of his suppliers in the past and I thought it quite interesting to pump him a little on his opinion of the Emperor. An arrogant meshuganah – you have to know how to deal with him.’ Those few words summed him up beautifully. Meshuganah is a Yiddish word meaning madman – not mentally ill, but someone who’s highly strung with some weird ways and crazy mannerisms.

  Later that year, I attended the CES show in Chicago, the biggest electronics show in the world. It was held biannually, in Chicago in summer and Las Vegas in winter. We took a stand on the British Booth, sponsored by the UK Government. I’d naïvely thought that I’d be able to sell my products in America, but nevertheless this stand was a good meeting point for customers and suppliers, as everybody in the industry went to Chicago. Gulu, for example, would rent a big suite and entertain his customers lavishly.

  I realised how big a company Morse was when I saw their stand, which was the largest one there, right by the main entrance. I’d agreed to meet Phil Morse at their stand and when I arrived, I couldn’t help but notice my tower systems were on display. Before I announced myself to Phil, I thought I’d ask some of his staff about the product. Typical Americans, so full of shit. They spoke about how they’d developed it themselves and how it was the new direction in hi-fi, following the Japanese trend, and they told me it was red-hot as far as sales were concerned. I took that with a pinch of salt, but nonetheless they were taking orders.

  To cut a long story, I had a blazing row with Phil Morse and started to get lawyers involved. I told Morse that I was finished with them – completely. What’s more, they had to stop selling this product immediately unless they came up with some financial compensation. This fell on deaf ears. Phil Morse didn’t believe I would take it any further. He had a big shock coming because I’d already learned a bitter lesson about copyright.

  I referred earlier to Malcolm Miller designing a range of car speakers, which basically we copied from Pioneer. This was to bite us on the nose. One day we received a very formal solicitor’s letter containing lots of drawings and documents in legalese. I knew this was serious – it was certainly out of the league of my personal lawyer, who’d helped me buy my house and dealt with smaller matters such as leases. I consulted a partner at Herbert Smith – Tony Willoughby, a specialist in this area.

  He took a look at the letter and at the products and told me, ‘You have a seriously big problem. What idiot in your company would have done something as blatant as this? Do you not understand the world of copyright? Didn’t the corporate people do due diligence on your company before it went public to ensure there was no chance of litigation?’

  I agreed with him. We had made a naïve and stupid mistake and we were most probably about to learn a hard lesson. In fact, Colin Lewin had tipped me the wink that Pioneer were up in arms and were going to take legal action. To cut to the chase, the result was that we had to deliver about 2,000 sets of speakers to Pioneer, who duly destroyed them.

  So, armed with this prior experience, it was clear to me that Phil Morse was bang in trouble. One thing he hadn’t realised was that I had taken the precaution of getting a signed piece of paper from Stanley Neichin and Moshe Mor saying that the tooling and design were my property, that we had fully paid for it and that they had no right to use it without our permission. I showed this to Phil Morse, but he kept going on about the fact that they had lost lots of money developing the tower system and that he felt we were partners.

  Herbert Smith wrote to Morse’s lawyers in America, telling them to stop producing immediately. Herbert Smith also had offices in Hong Kong and they teed up the partner there to serve some sort of injunction on Morse Hong Kong. It took a while for the penny to drop with Phil Morse. The guy was such a bigshot, he felt he was untouchable. He didn’t expect me to go to these lengths, but he must have been alerted by his attorneys that he was now up against it. It finally brought him to the table and in the end they agreed to pay us $5 for every unit they sold.

  Stanley Neichin was a bit of a slippery customer. He had made several mock-up samples of products just different enough from Amstrad’s tower system to avoid infringing our copyright. Shortly afterwards, they went into production and shipped them to the USA. More significantly, and nastily, he went on a trip to Europe touting these products around. And guess who he bumped into?

  You got it – Gulu Lalvani.

  Gulu had no assembly plant at the time; he was just an importer. Nevertheless, he would bullshit, saying that he wanted into this business. He had no intention of doing so – he didn’t know the first thing about assembly – but he took great pleasure in calling me to say that he’d just had Stanley Neichin in his office and was going to place an order with Morse for these units.

  I gave Gulu a bit of his own punishment. ‘Really? How much has he offered them to you for?’

  ‘How much does he sell them to you for?’ he said.

  ‘No, how much has he offered them to you for?’

  ‘Fifty-seven dollars.’

  ‘Oh, very good, very good, Gulu. Good price, you’ve done well.’

  ‘What do you mean? What do you mean I’ve done well? Is it a good price or not?’

  ‘Let’s just say you’ve done very well, Gulu. Not like you to pay over the top though.’

  ‘What? Is it too expensive? Too much?’

  ‘Do you expect me to tell you what price to pay? And anyway, what am I wasting my time talking to you for? You’ve got no intention whatsoever of starting up a production line.’

  ‘Yes, yes I am, at Wembley. We’re going to get a big place and we’re going to start assembling. And we also have new premises at Milton Keynes and we’re going to set up a production line there.’

  ‘Good. Well, good luck to you, but I have to tell you that Stanley Neichin’s mock-ups are crap and we’ve already moved on with another model.’

  Another model? What other model? What features has the other model got? Who’s making it for you? Morse?’

  ‘Mind your own business. Wait and see.’

  This slippery lot at Morse were out as far as I was concerned. It taught me to be very careful about choosing new partners and sub-contractors when inventing new items.

  Hawson had come at just at the right time. Bob and I flew off to Japan and had our usual trip around Akihabara before visiting Hawson in Taiwan. Bob referred to me as Hawk-eyes because he didn’t know how I managed to observe every single detail of something I’d spotted in Akihabara. In one of the stores selling up-market equipment used for professional recording, I noticed in the corner an industrial unit made by Sharp with a twin cassette dec
k for copying tapes.

  Bingo! Something sparked off in my mind. On the plane from Tokyo to Taipei, Bob and I sketched up a tower system with a double cassette deck mechanism. One of the cassette mechanisms would be play-only while the other would be the normal play-and-record type, the idea being that consumers could dub their own tapes.

  When we arrived at Hawson’s factory the next day, they had diligently prepared a mock-up sample of our tower system. They had enhanced the design of our TS40 and, frankly, it looked much better. I found out later that they’d used the services of a proper industrial designer, and it showed. I told them that we would be interested in going ahead on the basis that the bottom cassette section was modified to a twin cassette deck. Bob had drawn up something with a bit more detail overnight, which he handed to their designers, and within two days, they’d modified the mock-up sample. It was a drop-dead killer product.

  From my previous experiences with Morse and Pioneer, I was becoming a bit of a copyright lawyer. I called Willoughby from Taiwan to ask what kind of paperwork I’d need to ensure these people couldn’t rip me off. The problem was, Taiwanese law was a bit ropey and it would be very hard to enforce any judgement against them.

  He telexed me with some details and I got a secretary at the hotel’s business centre to type up an agreement in which Hawson would confirm that the total design and tooling belonged to us and that they had no right to sell it to others or alter it to avoid copyright infringement and produce a similar product, without our prior consent.

  They were so hungry for this business – their first venture into the electronics market – that they signed it immediately. The contract was based on English law, which gave us a little bit more security, but the reality of trying to enforce a judgement in Taiwan in those days was complicated to say the least.

  The twin cassette version of the tower system, the TS55, was launched in September 1981 and took off like a rocket. I think it’s fair to say that we set the template because in the years that followed, every single audio manufacturer in the world – including the Japanese and European giants – produced twin cassette audio units as staples. Our head start meant that we had a good eighteen-month to two-year run at it.

  Our national newspaper advertising was being cranked up. I told Malcolm Miller to take the precaution of putting an asterisk beside the picture of the new TS55 twin cassette tower system with its ‘tape to tape’ logo and at the bottom of the advert, in large, bold printing, we stated, ‘*It is illegal to copy copyrighted material. This machine should only be used to copy material you have generated yourself.’ If you picture a full page advert in the Daily Mirror, the warning was in bold black letters about a centimetre high.

  This was a cheeky tactic. People would read it and think to themselves, ‘Hey, that’s a good idea! I can use this machine to copy my mate’s Abba cassette.’ That was the effect the warning had, yet there was I, keeping within the law, whiter than white, telling people that the product should not be used for that purpose. Is that called reverse psychology?

  While on the subject of copyright, the BPI (British Phonographic Industry) – the organisation responsible for collecting royalties on music – started to make noises that our twin cassette product was inducing the public to copy tapes. The first few letters they sent me, I chucked in the bin, but they started to get a bit heavy, so I contacted Tony Willoughby who made a statement I’ve never forgotten, one that has haunted him throughout his career no doubt. He said that if they kept harassing us, we wouldn’t wait for them to take proceedings against us, we’d go to court and get a declaration that we were doing nothing wrong. In other words, attack is the best form of defence. He said that if he lost this case, he would give up being a lawyer and become a pig farmer. That’s how sure he was.

  Well, nine months later, all I could say was, ‘Oink, oink.’ The judge ruled for the BPI. I wouldn’t have minded, but the BPI hadn’t even brought an action against us. It was Willoughby’s brainwave to try to get a court declaration. Naturally, he was totally embarrassed by this.

  Representing us in court was a top-flight barrister, Tony Grabiner (now Lord Grabiner), and a junior counsel. As the story goes, when the judge read out his judgement, Grabiner turned to Willoughby and said, ‘Don’t worry about this – the judge has gone mad. We’ll win it on appeal.’

  We had to take the thing all the way to the House of Lords where eventually we did win. It was an historic victory which set a legal precedent – many subsequent disputes over breach of copyright have cited the Amstrad v BPI case. From my point of view, though, I could have done without this aggravation.

  Through our Hong Kong office, we went on to develop the twin cassette concept on to portable radio cassettes – nobody had ever done that before either. It was a massive hit and once again became the industry standard.

  It makes me laugh when I reflect on showing new products to someone like Currys’ buyer Ken Sladen. Initially, he greeted my twin cassette products with great enthusiasm, but as time went by and everyone jumped on the bandwagon, he would refer to ‘the Sanyo twin cassette’ or ‘the Sony twin cassette’ or ‘the Philips twin cassette’ as if they were commonplace products, as if twin cassette were some sort of natural progression rather than a brainchild of Amstrad.

  This was typical of retailers – they have no loyalty whatsoever. Maybe I’m a bit old-fashioned, but they conveniently forgot who put them in the twin cassette business in the first place. Instead, they would throw other manufacturers’ versions in my face to try to get me to compete. The twin cassette concept was, of course, not patentable as there was nothing novel in it – industrial duplicating machines already existed.

  *

  In the meantime, a new market was emerging in 1981 – citizens’ band radio (CB). This was effectively a glorified walkie-talkie which up until then was illegal in Britain because there was no allocated frequency for it. In the USA, CB radio had become very popular for people to install in their cars and trucks to communicate with each other while driving. Enthusiasts gave themselves ‘handles’, colourful names like Rubber Duck.

  In Britain, the industry lobbied the government to make CB radio legal and after a lot of pressure, the government agreed. However, they allocated a frequency that was different to the USA’s which meant that instead of importing the products already being made (in the Far East) for America, the electronic circuit had to be completely redesigned. Customers were contacting me, asking whether we were going to be active in this market, and it was clear to me that as soon as there was a product available, they would buy it in volume. The first one to market was going to win.

  Many Japanese suppliers were reluctant to invest in what they perceived to be the small UK market, especially bearing in mind they would have to redevelop their existing USA version. I finally found one fellow who would be prepared to make them. He told me that his company had a great relationship with Sanyo, who had embarked upon the fast-track development of a new chip for the British CB market. The first company to have a PCB ready for this chip would be the first company to be in the British market.

  Things were moving very fast. In March 1981 I agreed to make a one-day trip to Japan, as crazy as that may sound. At the time, there was a British Airways Boeing 707 which landed in Moscow for refuelling, then went on to Tokyo. I jumped on a plane, landed at around 3 p.m. Japanese time and was met at the airport by Mr Shigano, the boss of the company. We immediately went to the Okura Hotel to discuss the supply of CB radios to Amstrad.

  I could see this company was quite small, but to check them out thoroughly would have meant a delay we couldn’t afford. The bottom line was that he promised a delivery date which would mean we’d be first to market. I wanted to get an LC to him quickly, so he could see we were serious.

  The meeting went on till about 9 p.m. and after negotiating on price and exclusivity, Mr Shigano agreed to supply me. He then dropped a bombshell. In order to meet the delivery dates, he needed to have my front panel des
ign drawing by the following morning! He warned me that if the drawing were to be delayed for a week, then so would the shipment.

  My Brooke House education kicked in. I phoned room service and asked for a pencil and ruler to be brought up. Then, on Okura Hotel notepaper, I drew up the front panel design of our new CB radio based on the dimensions Mr Shigano had given me. I had to take into account where all the knobs would poke out and where the LED display would be and design the plastic front panel accordingly. I came up with two different designs: a basic model with fewer features and another up-market model which had more knobs and lights on the front panel. I intended to buy the basic model in small quantities, simply to obtain what was known as a lead-in price.

  Consumers are quite funny people. They are attracted by a lead-in price, such as £39.99, but when they arrive at the point of sale and see the upmarket model for £49.99, human nature makes them enquire about the better model. The salesman in the store then explains that this is the deluxe version and, nine times out of ten, the customer buys it. This technique would prove successful in the years to come.

  It was 11 p.m. and I had just about drawn the outline of the front panel. I was stuck because I had no implement to draw the circles for the knobs. The Okura Hotel sewing kit came in very handy here – the shirt buttons in the kit were proportionally the right size for my drawing (it was drawn to half scale) and so I drew around one to create the four knobs on the front panel. Shigano was very surprised at our breakfast meeting the next morning when I presented him with the drawings and told him I had produced them myself. Can you imagine explaining that?

  ‘How did you arrive at that design?’

  ‘Er, with shirt buttons, mate!’

  I had taken the wind out of Shigano’s sails and I told him that now he had no excuse and could immediately start tooling the front panel. Being Japanese, he could not lose face. I then set off back to London. In the one-hour layover in Moscow I bought a set of Russian dolls as a present for Ann and the kids. This, I understood, was a typical Russian novelty. Credit to Shigano, he stuck to his word. We airfreighted in the first shipments of CB radios at great expense and hit the market in November 1981, before anyone else. This enabled us to open up some new customers, such as Rumbelows, with whom we’d not previously dealt. These were giant chain stores with hundreds of shops all over the country.